Close supply chain relationships can bring reciprocal benefits

By Lori Angalich | Tue, Oct 09, 2012

Companies are interested in any process or procedure that can improve supply chain efficiency. The process of shipping goods to all of the many places they are needed consumes a significant portion of any firm's budget and time.

According to EBN contributor Douglas Alexander, one particular form of strategy could soon become a more prominent part of such efforts. He noted that companies that enjoy close relationships with their trading partners can create loops of production and availability, turning customers into suppliers and vice versa.

Loops in the chain

According to Alexander, more companies are eager to add new supply links to the chain from existing partners. Many companies can find redundancies in their partner environments, where a customer can be chosen as the source for a necessary part or material. These companies are often small and medium-sized businesses and strengthening them can reciprocally empower large manufacturers and distributors.

Alexander suggested that IBM is one prime example of a company prospering from purchasing from its own suppliers. He explained that the technique is especially successful at IBM because many of its products are well suited to the SMB market, thus making it easier to close the loop and establish connections that run both ways.

The small companies that enter into the supply chain environment for large corporations often see excellent results, according to Alexander. He explained that a recent market overview found a dramatic spike in revenue for SMBs supplying multinationals. Creating a thriving class of small companies has benefits for both those firms and the large companies, deepening the case for close integration between partners of various sizes, each keeping the other strong to encourage future stability and uninterrupted revenue streams.

Integration enabled

Strong B2B integration between trading partners becomes even more important when the links and connections between those companies change and deepen. Keeping systems like EDI strong with such a policy in place would then increase the speed of two transactions instead of one.

The suppliers' status as SMBs may mean they lack the proper connections for full B2B integration. Fortunately, according to Logistics Viewpoints contributor Chris Jones, there is a way around this. He explained that large companies with strong integration infrastructures can create systems that accommodate smaller partners, making it possible to establish an efficient link with those companies as though they were significantly larger than they are.